Government Intervention Caused Economic Crash
Government intervention is the cause of boom and bust. FED artificially kept credit rates cheap to encourage borrowing in order to postpone recessions for many decades. Whenever there was a recession, the government was under pressure to "fix the economy". They turned to the FED and FED made credit easy. America borrowed and inflated the money supply. Our money supply is not printed money, it is credit. It was borrowed from the banks. When entire money supply is debt and needs to be paid back with interest, it is a problem. The only way to keep it going is to inflate debt even more so that principal + interest of old debt exists with new borrowing.
To keep it going, the government created Fanie, Freddie. Who in his right mind would lend money for 30 years to questionable borrowers if there was no guarantee? Coupled with mortgage interest deduction, sub-prime, no 20% down, liar loans this helped further expand credit and the money supply. At last we ran out of borrowers.
To make all this lending possible, the government created FDIC. People trusted the money to the banks and did not question what the banks did with it. In the old days banks were mostly invested in pristine government debt. Even if housing market collapsed, they would remain solvent then. But today banks are 98% invested in mortgage debt whose collateral detoriates in time!
This is how the government intervention into the free markets resulted in the opposite effect: Deflationary Depression!
http://kondratieffwinter.blogspot.com/2010/02/government-intervention-makes-it-worse.html